Validation of Sri Lanka Country Partnership Strategy Final Review, 2016–2021

Evaluation Document | 13 May 2022

This validation covers Asian Development Bank’s (ADB) support for Sri Lanka during 2016–2020. It includes ongoing and completed ADB loans, grants, and technical assistance (TA) from 2016 to 2020. The validation aims to identify lessons and recommendations for ADB’s future operations, in particular the forthcoming Sri Lanka Country Partnership Strategy (CPS), 2023–2027. 

The validation assesses the ADB program successful overall. It was relevant, efficient, effective, with satisfactory development impacts, but less than likely sustainable. The validation assessed the program less than sustainable given Sri Lanka’s negative fiscal situation, declining revenue, and increasing debt burden. 

The validation recommends that ADB take the following four actions:

  • Prioritize fiscal reform and public financial management in the next CPS. Declining revenue, high recurrent expenditure and debt servicing obligations have limited Sri Lanka’s ability to provide essential public services and social welfare. In the aftermath of COVID-19, the government’s fiscal constraints have further constrained recovery efforts. ADB needs to be ready to support recovery efforts in partnership with other international financial institutions while making sure that fiscal reform will be one of the government’s key priorities.
  • Enhance coordination with an expanded development partner community to address debt issues. As one of the largest lenders, ADB should play an active role in supporting government efforts to improve debt sustainability and promote responsible and sustainable lending among all development partners. ADB should help the government develop sustainable sector plans and policies that can guide government and other development partners’ support. ADB must be proactive in establishing communication with all development partners.
  • Intensify support for private sector development. ADB should aim for greater synergy across sovereign and nonsovereign operations to support private sector development more effectively. Nonsovereign operations should be broadened beyond the financial sector. Given the difficulty of finding potential private sector clients, ADB may need to actively create demand and value added by investing in upstream activities and policy reform.
  • Maintain flexibility in ADB country program and support. Given its current fiscal and debt-related issues and the challenges of post-pandemic recovery, Sri Lanka’s economic outlook is uncertain and government development priorities may change. ADB needs to retain flexibility in how it responds to the country’s needs over the short to medium-term. This may involve being ready to support a package of macroeconomic reforms along with other development partners, as well as to compensate for any social welfare losses over the immediate term.

Note on IED's Country Evaluations and Validations

Using its 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations, the Independent Evaluation Department (IED) intends to provide an objective and informed judgement of the performance and results of country partnership strategies (CPSs), particularly in terms of their relevance, effectiveness, efficiency, sustainability and development impacts.

In ascertaining relevance, IED considers not only the alignment of the program with country needs and government objectives, but also cross-sector CPS objectives, appropriateness of modalities and sector program designs, and sufficiency of donor coordination.

The effectiveness of a country program in delivering results is also an important aspect of an IED evaluation. Primary focus is on the achievement of the outcomes and outputs of ADB interventions (and the likelihood of achievement if the program is still ongoing), as worded in CPSs and their results frameworks. These include knowledge products and institutional development efforts.

Performance and results are likewise judged from an efficiency perspective, that is, whether the program was delivered in a cost-effective and timely manner, and generated value for money. It also considers the capacity of executing agencies that may contribute to start up and implementation delays, and cost overruns.

Another critical element of IED's evaluation is the likely sustainability of results over the medium term, technically, financially, environmentally, socially, politically, and institutionally. Further, IED looks at how results led to development impacts. Specifically, whether ADB contributed to achieving the CPS objectives, directly through its sector programs and implementing cross-cutting agenda(s) across various modalities in different sectors and by various development partners.

IED gives special importance to cross-cutting objectives by considering how the cross-sectoral and thematic objectives of the CPS are articulated in the results framework and provided with appropriate indicators and targets; and how the program achieved the cross-sector thematic results. Equal weights are given to the achievement of sector and cross-cutting objectives in the relevance and development impact assessments, in both country assistance program evaluations (CAPEs) and CPS final review validations (CPSFRVs). This aligns with ADB's increasing emphasis on achieving corporate strategic priorities.

In preparing its country evaluations and validations, IED conducts document reviews, consults with concerned departments, staff, governments and other stakeholders, and undertakes evaluation missions. IED has put in place a quality assurance system to ensure consistent application of its 2015 guidelines. In CPSFRVs, IED's primary focus is to validate the evidence presented in the CPS Final Review.